CFA Level 3 answers 2011
LEVEL III
Question:
Topic:
Minutes:
1
Individual PM/Behavioral
15
Reading References:
2011 Level III, Volume 2, Study Session 3, Reading 7, pp. 5–12
“Heuristic-Driven Bias: The First Theme,” Beyond Greed and Fear: Understanding Behavioral
Finance and the Psychology of Investing, Hersh Shefrin (Oxford University School Press, 2002)
2011 Level III, Volume 2, Study Session 3, Reading 8, pp13–20
“Frame Dependence: The Second Theme,” Beyond Greed and Fear: Understanding
Behavioral Finance and the Psychology of Investing, Hersh Shefrin (Oxford University
School Press, 2002)
2011 Level III, Volume 2, Study Session 4, Reading 16, pp. 246–250
“Estate Planning in a Global Context,” Stephen M. Horan, CFA, and Thomas R. Robinson, CFA
(CFA Institute, 2009).
LOS:
2011-III-3-7-a
7. “Heuristic-Driven Bias: The First Theme”
The candidate should be able to
a) evaluate the impact of heuristic-driven biases (including representativeness, overconfidence, anchoring-and-adjustment, aversion to ambiguity) on investment decision making.
2011-III-3-8-a
8. “Frame Dependence: The Second Theme”
The candidate should be able to:
a) explain how loss aversion can result in investors’ willingness to hold on to deteriorating investment positions;
b) evaluate the impacts that the emotional frames of self-control, regret minimization, and money illusion have on investor behavior.
2010-III-4-16-a, b, f, g
16. “Estate Planning in a Global Context”
The candidate should be able to:
a) discuss the purpose of estate planning and explain the basic concepts of domestic estate planning, including estates, wills, and probate;
b) explain the two principal forms of wealth transfer taxes and discuss the impact of important non-tax issues, such as legal system, forced heirship, and marital property regime;
c) determine a family’s core capital and excess capital, based on mortality probabilities and
Monte Carlo analysis;
2011 Level III Guideline Answers
Morning
Question:
Topic:
Minutes:
1
Individual PM/Behavioral
15
Reading References:
2011 Level III, Volume 2, Study Session 3, Reading 7, pp. 5–12
“Heuristic-Driven Bias: The First Theme,” Beyond Greed and Fear: Understanding Behavioral
Finance and the Psychology of Investing, Hersh Shefrin (Oxford University School Press, 2002)
2011 Level III, Volume 2, Study Session 3, Reading 8, pp13–20
“Frame Dependence: The Second Theme,” Beyond Greed and Fear: Understanding
Behavioral Finance and the Psychology of Investing, Hersh Shefrin (Oxford University
School Press, 2002)
2011 Level III, Volume 2, Study Session 4, Reading 16, pp. 246–250
“Estate Planning in a Global Context,” Stephen M. Horan, CFA, and Thomas R. Robinson, CFA
(CFA Institute, 2009).
LOS:
2011-III-3-7-a
7. “Heuristic-Driven Bias: The First Theme”
The candidate should be able to
a) evaluate the impact of heuristic-driven biases (including representativeness, overconfidence, anchoring-and-adjustment, aversion to ambiguity) on investment decision making.
2011-III-3-8-a
8. “Frame Dependence: The Second Theme”
The candidate should be able to:
a) explain how loss aversion can result in investors’ willingness to hold on to deteriorating investment positions;
b) evaluate the impacts that the emotional frames of self-control, regret minimization, and money illusion have on investor behavior.
2010-III-4-16-a, b, f, g
16. “Estate Planning in a Global Context”
The candidate should be able to:
a) discuss the purpose of estate planning and explain the basic concepts of domestic estate planning, including estates, wills, and probate;
b) explain the two principal forms of wealth transfer taxes and discuss the impact of important non-tax issues, such as legal system, forced heirship, and marital property regime;
c) determine a family’s core capital and excess capital, based on mortality probabilities and
Monte Carlo analysis;
2011 Level III Guideline Answers
Morning
References: E. Tierney, Managing Investment Portfolios: A Dynamic Process, 3rd edition (CFA Institute, 2010)